Oil, SolarCity tapped as two long plays in this sketchy stock market

By Shawn Langlois

Reuters

The flow of economic news is fairly upbeat, earnings season is expected to show some pluck, U.S. stocks closed Friday on a positive note and Asia just put the finishing touches on a bullish start to the week.

Cold truth is, we are coming off the first down week for the S&P in a month, and the volatility only looks to pick up from here. Janet Yellen is about to say… something, and there are the dark clouds to deal with overseas, the latest involving the flare-up in Russia and the threat of “irreversible consequences.”

What’s more, any good news that happens to surface will have to grapple with the return of a “decidedly bearish” trend from earlier in the the year. While the S&P shed less than 1%, the Russell 2000 lost 4%, social media stocks gave up 5% and biotech suffered a 6% loss, according to Michael O’Rourke of Jones Trading.

“When this occurred back in March and April, the S&P 500 was the notable beneficiary giving up little ground as investors shed high octane positions in favor of staid blue chips,” he wrote in his daily market update. “It will be important to see how the S&P 500 navigates this episode and whether the second move lower for the momentum and high beta groups elevates investor concern.”

The quote of the day: “Indeed, while it’s all well and good for Angela Merkel to plant a sweaty kiss upon the cheek of Mario Goetze and to warn about the perils caused by those damned Portugeezers, the trend in the German data isn’t exactly screaming ‘Deutschland uber alles.’” — Macro Man

The economy: Nothing to speak of today, but it’ll be a busy week of data starting with retail sales and Janet Yellen testimony on Tuesday and ending with the consumer sentiment index on Friday. See Calculated Risk’s full schedule.

The chart of the day: A crude pop is in the offing, says Market Anthropology’s Erik Swarts, who uses this chart to support his case. “With light sweet crude falling another 2% on the day, the commodity looks quite attractive for those looking to either diversify a portfolio, or capture the next leg higher, which we believe has already been foreshadowed by the recent moves in precious metals,” he wrote.

The call of the day: The short squeeze delivered in a big way for longs playing the momentum names earlier this year, and another tasty opportunity could be upon us in SolarCity
/quotes/zigman/13139813/delayed/quotes/nls/sctySCTY shares, according to Seeking Alpha’s Bill Maurer. “Despite a rise in share price during late June, short interest in SolarCity actually increased,” he wrote. “At this point, more than a quarter of the float is now short, which will slowly but surely start to increase the chances of a short squeeze.”

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